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Restructuring and insolvency law in Ireland covers the legal processes and frameworks that apply when businesses or individuals are unable to pay their debts. It aims to provide solutions for distressed companies and individuals while balancing the interests of creditors and other stakeholders. Restructuring usually refers to efforts to reorganize the financial or operational structure of a business to restore its viability, while insolvency refers to a state where liabilities exceed assets and debts cannot be paid as they fall due. Irish law offers several legal mechanisms to assist financially troubled entities with the aim of either protecting the business, maximizing asset recoveries or achieving a fair distribution among creditors.
Legal advice is crucial in restructuring and insolvency matters because these situations are often complex and require a deep understanding of the law and available procedures. Some common reasons to seek legal help include:
A solicitor specializing in restructuring and insolvency can provide tailored advice, represent you in negotiations or court proceedings, and help protect your interests during what is often a stressful and uncertain time.
Irish restructuring and insolvency law is mainly governed by the Companies Act 2014, with supplementary regulations and rules from the courts. The main procedures available are:
Directors have statutory duties, including the obligation to act in the best interests of the company and its creditors once insolvency is imminent. There are also provisions relating to preferential payments, improper trading, and personal liability for directors in certain circumstances.
Restructuring involves reorganizing a business to improve its financial position, often to avoid insolvency. Insolvency refers to a situation where an individual or company cannot pay their debts as they become due.
Common signs include cash flow issues, mounting debts, overdue taxes, pressure from lenders or suppliers, and difficulty collecting receivables. Early engagement with a solicitor or accountant is advisable.
Examinership is a court-supervised process intended to help insolvent companies restructure and survive. During examinership, the company is protected from its creditors for a specific period while a restructuring plan is formulated.
Liquidation is the process of winding up a company’s affairs, selling its assets, and distributing the proceeds to creditors. Once complete, the company is dissolved and ceases to exist.
Generally, directors are not personally liable for company debts. However, if they have engaged in reckless or fraudulent trading or have breached their duties, they can be held personally responsible in certain circumstances.
Receivership occurs when a secured creditor appoints a receiver to take control of the company’s assets covered by a security agreement, usually for the purpose of repaying outstanding debt.
Individuals can apply for a Debt Relief Notice, Debt Settlement Arrangement, or Personal Insolvency Arrangement under the Personal Insolvency Act 2012, or opt for bankruptcy as a last resort.
The order of payment is generally: secured creditors, preferential creditors (like employees and certain taxes), unsecured creditors, and finally shareholders. Certain payments, if made shortly before insolvency, may be recoverable.
Yes, informal arrangements and negotiations with creditors, or processes like Schemes of Arrangement, can sometimes provide solutions outside court. Legal and financial advice is key to exploring these options.
Seek immediate professional advice. Avoid taking on new credit, making preferential payments, or concealing assets. Directors must prioritize creditors’ interests and may need to consider formal insolvency options.
If you need more information or support regarding restructuring and insolvency in Ireland, the following resources can be helpful:
If you are facing potential insolvency, or if you need to restructure a company or navigate personal insolvency options, consider the following steps:
Dealing with financial difficulties can be daunting, but early professional advice can help manage risks, protect assets, and guide you towards the best possible outcome for your circumstances.
